Achieving Growth Satellite Finance Network Annual Conference 21 - - PowerPoint PPT Presentation

Achieving Growth

Satellite Finance Network Annual Conference 21 April 2015

Welcome

Welcome:

Alison Horrocks Executive Vice President Inmarsat

Welcome:

Richard Peckham Business Development Director (Space) Airbus Defence and Space Co-Chair SFN

SFN Success Stories

Joanne Wheeler Partner Bird & Bird Co-Chair SFN

Satellite Finance Network

With you every inch of the way Finance and regulatory network for the UK space industry

Aim – to support the growth of the UK space industry at all levels Launched – 16 July 2013 at UK Space conference in Glasgow Emerged from – Space Innovation and Growth Strategy (IGS), published in 2010, and the "Restack" of the IGS in 2014.

SFN

Aim – to support the growth of the UK space industry

1. Facilitating and attracting investment

• Connecting industry players (particularly SMEs) with the financial

community 2. Identifying regulatory barriers and other impediments to growth

• Working to create a "space friendly" and competitive regulatory

environment for the UK

• Offering solutions, where they exist, to industry players
• Encouraging and supporting exporters in areas of finance and

regulation 3. Promoting business opportunities between companies

Facilitating and attracting investment

Connecting industry players (particularly SMEs) with the financial community

(including UK Export Finance and advisers or providing an opportunity to present an elevator pitch to investor community)

Some examples Bright Ascension iSat Networks e2E Bristol Spaceplanes Charles & Paul Travel A1 UrtheCast D-Orbit Tisics Alba Orbital Space Synapse Systems Kypros Satellites Aerospace Resources Ltd Evening Star Artemis Space

Identifying regulatory barriers and

• ther impediments to growth
• Working to create a "space friendly" and competitive regulatory

environment for the UK

• Delivering key recommendations of IGS – pushing for reform of

the Outer Space Act to cap unlimited indemnity; and put UK companies on a level playing field

• Removal of 6% insurance premium tax on satellite risks which

placed UK companies at a competitive disadvantage

• Offering solutions, where they exist, to industry players e.g. –

providing advice to satisfy "financial standing" criteria to obtain an Outer Space Act licence.

Identifying regulatory barriers and

• ther impediments to growth (cont…)
• Encouraging and supporting exports in areas of finance and

regulation

• Collaboration with, and introductions to, UK Export Finance
• Assisted a company in the final closing days of a finance

facility to enable a valuable export contract to be implemented Illustrated genuine value of collaboration between SFN, UK Export Finance, a bank and the company.

Promoting business opportunities between companies, and supporting "every step of the way"

Other assistance provided by SFN:

• Introductions to:
• UKTI Innovation Gateway Team
• Local Enterprise Partnerships
• Assistance to lease facilities/offices in various areas (Surrey, Harwell)
• Networking at conferences/finance briefings
• Opportunity to provide Elevator Pitches

… more opportunities to come

BUT SFN WOULD NOT EXIST WITHOUT SUPPORT OF:

• SATELLITE ADVISORY BOARD
• Richard Peckham, Airbus
• Paul Flanagan, UKspace
• Antonia Jenkinson, Satellite Applications Catapult
• Nick Flitterman, Portland Advisers
• Liam Martin, Access Partnership
• Bob Waters, UK Space Agency
• Peter Maplestone, UK Export Finance
• Neil Stevens, Space Fin Limited
• Professor Richard Brook, E-Synergy
• John Aldred and Stephen Ainsworth, Barclays

BUT SFN WOULD NOT EXIST WITHOUT SUPPORT OF:

• Inmarsat
• Satellite Applications Catapult
• UKspace – Jane Ford
• UK Space Agency
• UK Export Finance
• UKTI
• Bird & Bird
• The SFN Members

SPONSORS OF THIS CONFERENCE:

• Bird & Bird
• Barclays
• Norton Rose Fulbright
• Satellite Applications Catapult
• UK Space Agency
• Inmarsat
• Printech
• UKspace
• Oxford Space Systems
• SharpCloud Software

So – what's next?

• Twice yearly newsletter
• "Where to start" mind map

web page

• Finance briefing and elevator

pitches 3 July 2015

• "Space Industry Directory"

So – what's next?

• Collaboration with European Centre of Space Law (ESA)

to provide regulatory and legal seminars

• "BackonBoard" project
• Other collaborations…
• Continuing to identify and bring down barriers to achieving

growth

Achieving Growth

Senior Executive Viewpoint: Chair - Mark Holmes, Editor, Via Satellite Rupert Pearce, CEO, Inmarsat Stewart Sanders, CTO, O3b Networks Tim Sherwood, Chair, Satellite Applications Catapult Matt Child, SVP Government Sector, Eutelsat Andrew Wallace – Director, Hermes Integration & CEO, Pyreos

Coffee

sponsored by

Overcoming Hurdles – Achieving Growth

Chair – Stuart Martin, CEO, Satellite Applications Catapult Richard Brook, Co-Founder, E-Synergy Theresa Condor, VP Corporate Development, Spire Jonathan Waugh, Head of Public Safety, Airbus Defence and Space Andrew White, Partner, Bird & Bird Simon Acland, CIO, Imprimatur Capital Mike Lawton, CEO, Oxford Space Systems

Page 20

Overcoming Hurdles to Achieve Growth

Achieving Series A funding Turning Loss into Profit Funding a space start- up Risks in commercial contracts Correct management team Raising profile

• Richard Brook, E-Synergy
• Theresa Condor, Spire
• Jonathan Waugh, Airbus Defence and Space
• Andrew White, Bird & Bird
• Simon Acland, Imprimatur Space Fund
• Mike Lawton, Oxford Space Systems

Page 21

Achieving Series A Funding

Richard Brook Co-founder E-Synergy

… up to the bigger players

From seed stage, friends and family, and small investors …

Series A A company's first significant round

• f venture capital investment…

Series A “May be provided in the form of preferred stock and

• ffer anti-dilution provisions to new investors.”

Beware liquidation preferences etc…

Rungs on the ladder

• Readiness
• Availability of debt and grants?
• Crowdfunding?
• Platform?
• VC?
• Understanding sources of finance?
• Team
• Traction
• Milestones

Case Study University Biotech Spin-Out

2004 Platform technology extracted from university Killer application after 4 Seed Rounds 2008 Recruited new industry chair Series A consortium round: VCs+VHNWs Convertible loans + liquidation preferences Changed CEO Several £m invested in 7 more stages Essential to follow VCs to avoid dilution 2014 Buy & build merger: loans converted Listed on AIM

Page 26

Funding a space start-up: from private savings to private equity Theresa Condor VP Corporate Development Spire

Series A Funding Achieved

Start-up Funding: Private Savings to Private Equity

Theresa Condor

Start-up Funding Needs an Exponential Curve

Time

Revenue $$ Raised Value of Co. People

Fundable Not Fundable

Typical Funding Progression

Private Savings Angel A Venture Debt B Venture Debt PE (Venture) Debt IPO When Month 0 Month 6 - 12 Month 12 -24 A A + 1-2 years B B + 2-3 years PE PE + 3 years Amount < 100k 1 -2mm 5-8mm 20% of A 2 0 -30mm 30% of B 100mm – 1B 50 – 100% of PE 1 – 100B Revenue <100k <1mm ~10mm 100mm 1B Timeline 1 -3 months 1 – 6 months A + 3 months 3-4 months B + 0-6 months 6 months

Simultaneous

12 months Employees 3 <10 <25 <100 >100 >250 Dilution 20 – 30% 20 – 30% 10 – 20% 10 – 15% ~10%

Spire Case Study

Sept ‘12 Jan ‘13 July ‘13 July ’14 July ‘15 Sept 12 Jun 13 Jul 13 June 14 July 15 People 3 7 12 17 ~50 Value $ 5x 2y 10z Amount < - 50k > - 1.3mm > - 25mm Time 3 months 1 week 4 months Revenue <- 150k <1mm >-10mm

Spire Progress

Page 31

Turning loss into profit Jonathan Waugh Head of Public Safety Airbus Defence and Space

Series A funding achieved Space start- up funded

Page 32

Managing risk in commercial contracts to ensure growth

Andrew White Partner Bird & Bird

Making profit Series A funding achieved Space start- up funded

Managing risks in commercial contracts

Andrew White, Partner, Bird & Bird LLP, at the Satellite Finance Network (SFN) Annual Conference, 21 April 2015

Clarify

• bligations…..

Agree which party is liable for what…..

Embed processes for effective contract management…..

Managing risk by clarifying obligations…..



What does the promise to deliver involve? Timescales? Level of investment required? A robust supply chain? etc



What is being provided, and to what standard?



What conditions are attached (eg third party consents?) Which third parties do you depend upon?



Payment: what, when, to whom and how?



Who are the deliverables for? Delivered where? For what purpose?



Does the customer need a delivery guarantee from provider? Does the provider need a payment guarantee from customer?

Key message: Increase certainty and manage risk by clarifying obligations under a contract. Vague, conflicting or unrealistic obligations are a frequent source of dispute and business risk…..

Managing risk by agreeing who's liable…..

 English law upholds 'freedom of contract'. Side-by-side with that concept is the concept

• f 'freedom to limit' liability

 Financial liability for breach of contract, delay, negligence or certain types of

misrepresentation can be limited, or even excluded

 Other solutions for contract breach, or other triggers, include liquidated damages,

indemnities, guarantees or termination rights

 These contractual arrangements can go further than under the laws of most other

countries (including continental European laws)

 There's only limited statutory protection against 'unreasonable' terms in English law

B2B contracts. The bargaining power and resources of the parties are relevant in assessing what's reasonable…..

Key message: English law permits businesses entering into contracts to limit or exclude many types of liability for breach, or for the impact of financial difficulty. These arrangements need to be documented…..

Managing risk by embedding processes…..

 Agreeing a system of law to govern disputes  Governance: project meetings, information sharing, audit rights  Driving performance improvement and value/innovation  Maximising the value of intellectual property generated by the parties  Mechanisms for agreeing matters which are deliberately left open  How to deal with third parties (eg regulators, or violators of rights)  Early warning systems for problems  Flexible dispute management, eg mediation or expert determination  Fixing time limits for making claims, and for other notifications

Page 36

Key message: Many contracts, especially long-term or strategic contracts, are built around a relationship requiring cooperation and communication. Embed 'rules of the road' to guide that relationship. This can help to manage risk and to maximise business

• benefits. For example:

B2B contracting in the real-world…..

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Your behaviour can affect your contractual rights….. …..you can find yourself in a binding contract without meaning to, or without even writing anything down …..you can surrender valid rights without intending to: lesson – manage the contract carefully after signature …..a trusting and cooperative business relationship can sometimes compensate for even a one-sided written contract Your legal advisers need to help you and empower you by….. …..showing commercial awareness of your sector, and its drivers …..recognising your day-to-day challenges and resource constraints …..providing tools, methodologies and training to drive your excellence in contract negotiation and post-signature management

1 2 4 5 6 3

Page 38

Ensuring the correct management team to achieve growth

Simon Acland CIO Imprimatur Capital

Making profit Series A funding achieved Space start- up funded Contractual risks managed

Page 39

How to raise your profile with no budget Mike Lawton CEO Oxford Space Systems

Management team in place Making profit Series A funding achieved Space start- up funded Contractual risks managed

There are currently 2,300+ registered satellites orbiting Earth.

Over the next 10 years this number is forecast to double.

Launch is expensive:

£20,000+/ kg

Two biggest factors:

size & weight

To maximize cost efficiency, critical components are designed to deploy in orbit.

Deployment Sequence of Large Deployable Antenna

OSS Prototype Boom / Actuator Deployment of Magnetometer Standard 3U cubesat chassis

De-Risking Strategy: CubeSats

Press Coverage for 2016 CubeSat Boom Mission

Mike Lawton m: 07740 937 935 mike.lawton@oxfordspacesystems.com www.oxfordspacesystems.com

OXFORD SPACE SYSTEMS HARWELL SPACE CLUSTER HARWELL OX11 8NB UNITED KINGDOM e: explore@oxfordspacesystems.com

Page 48

Overcoming Hurdles to Achieve Growth

• Richard Brook, E-Synergy
• Theresa Condor, Spire
• Jonathan Waugh, Airbus Defence and Space
• Andrew White, Bird & Bird
• Simon Acland, Imprimatur Space Fund
• Mike Lawton, Oxford Space Systems

Strong profile Management team in place Making profit Series A funding achieved Space start- up funded Contractual risks managed

Networking Lunch

sponsored by

IP Surgery

Adam Brocklehurst, Patent Attorney, K2 IP parallel session taking place in Dopplar – 1st Floor

Financing Growth

Chair: Nick Flitterman, Head of Telecoms, Portland Advisors Richard Brook, Co-Founder, E-Synergy Mark Boggett, Managing Director, Seraphim Capital Marcus Plumley, Director, HSBC Stephen Ainsworth, Relationship Director, Barclays Elia Montanari, Head of Financial Control and Management Office, ESA Michael Lawrence, Business Development Director, Deimos Space UK Ltd

Growth Through Exports

Chair: Steve Young, Head of Sales & Marketing, SSTL Chris Lee, Head of International Space Policy, UKSA Terry Coxall, Space Specialist, UKTI David Harper, CEO, iSat Networks Ali Sherwani, Deputy Head of International Business Development, UK Export Finance Farmida Bi, Partner and Head of Islamic Finance, Norton Rose Fulbright Maurizio Vanotti, Head of Telecom Satellites, SSTL

The UK’s Leading Manufacture of Specialist Satellite Terminals and Systems.

SME Export

iSat Ltd

iSat Company Strengths

iSat background

• An established leading UK Space Sector Company
• International government and defence accreditation

including NATO, UK List X and ISO9000 with extensive broadcast plus enterprise experience.

• Experienced team of sector specialists; 4 years track

record as iSat; 20 years heritage as L-teq and OmniGlobe.

Target activities

• Approve VSAT terminals for Satellite Operators to sell

services at new frequencies.

• Targets hit at

– Qatar Satellite Company (18GHz transmit; 22GHz receive + 27GHz/17GHz Ka) – Airbus Defence and Space (X-band) – ARABSAT (Appendix Ku)

• First to market gains a commercial and technical IP.

Sales Strategy, 2 routes to market

• To sell end to end solutions direct or
• To supply the terminal into the customers preferred prime contractor (s).
• Opportunities arise to sell satellite bandwidth to create monthly revenues

Suppliers Prime contractor

Customer (Satellite

• perator or

a satellite bandwidth user).

Customers supply chain Other suppliers iSat iSat Other suppliers

Es’hailSat or Government department

Company Management Structure

Phil Headley Constructional Engineer Clive Smith Training Board Directors Neil Blackley, John Pocock Chairman Kevin Cawood Steve Jolliffe IT David Harper CEO Ravi Goonesena Macrae & Co Legal Ola Lawal HSBC Project Finance David Tudor Logistics Robin Page Documentation Sharon Hooper Quality Manager Andy Chance Technical Head Yvonne Sheridan Commercial Accountant Ian Townsend Production Manager David Beck Marketing Martyn Braime Business Advisor John Yates Technical/Commercial Advisor Board of Directors Full time

• perational

CEO and advisors Part time support Contractors

Current figures

• £653,036 Year to date sales (end 03/15)
• £249,034

Orders in hand to ship

• £1,472,345 Tenders submitted including:-

– £345,314 18/22GHz fixed antennas – £758,156 C-band circular extended. – £165,577 18/22 Vehicle mounted – £ 98,951 X-band frequencies – £ 9,029 Others

• £1,903,329 Additional pipeline opportunities

iSat Company Funding

Funding

• 2011 Initial seed funding £405K Equity

– Seed funding from Synergy Business. – High Net Worth individuals known to the founder. – Employees, family and friends.

• 2014 Working capital funding £100K HSBC
• 2015 Working capital funding £125K HSBC
• 3rd stage will be expanding the activities into 3 or 4 times

the number of customers

iSats exports offer dramatic growth to £10M by 2020 by exploiting track record and reputation

• Extend sales to....

– Other satellite operators needing similar terminals – Vehicle mounted / Maritime – Add services and options. – With a stronger balance sheet and technical team

• Higher value projects for hubs
• Recurring bandwidth revenues.

Stage 3 Funding Requirements

• More sales to address similar satellite operators with low

product development.

• Stronger balance sheet to give confidence to new customers.
• More technical resource
• Incremental developments
• Aim is to create stable monthly revenues and a profitable exit

for shareholders.

Typical Finance required by SME to go from 2/3 customer to 10/20

Strengthen critical sales and engineering resources to support the growth

• bjectives.

£300K Company awareness and lead generation. £50K Additional Specialist Terminals development. £350K Engineering and manufacturing tools and resources. £200K Cash requirements to gear the company correctly. 500K* Potential market consolidation and M&A. Up to £2M

* HSBC currently provide £125 and are interested in making money- obviously.

Conclusions

• Established sales strategy that is working.
• Funding can accelerate dramatic growth in a global market.
• Related target markets have been identified with small

quantifiable technical development required.

• Potential business opportunities exist for iSat to reach £10M

sales by 2021 and provide an attractive proposition for acquisition.

• Existing owners with a desire to move forward.

Closing Remarks

Rupert Pearce CEO Inmarsat

Networking Reception

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